The Financial Conduct Authority (FCA) has announced plans to reform the mortgage market in response to concerns about access to affordable mortgages. The FCA’s review follows observations that certain lending practices may be “unduly restricting access to otherwise affordable mortgages.” The reforms we propose here will do away with confusing mortgage rules. They’ll go further by rolling out flexible products that can meet a range of working patterns and income types, at different points in life.
The average two-year fixed mortgage rate stands at 4.84%. At the same time, the five-year fixed rate is at 4.91%, Moneyfacts’ update on Monday showed. In response to a slowing market, many lenders have begun reducing the interest rates used to stress test potential borrowers. This transition would make it easier for future first-time homebuyers to obtain a mortgage.
Matt Smith, a mortgage expert at Rightmove, indicated that home-movers will likely enter 2026 facing cheaper average mortgage rates compared to this year. He noted that many Americans have experienced a decrease in home value in their local market in the last 12 months. Because of possible pay increases at the end of the year, houses will soon become even more affordable for them.
Nationally, average UK house prices are at a record high of £272,998 in November, according to mortgage lender Nationwide. Chief economist of Nationwide, Robert Gardner, feels positive about the housing market. In 2023, he’s projecting that prices will increase anywhere from 2% to 4%. A hypothetical 4 per cent increase would bring the average price of a house in the UK to an estimated £283,918.
In the year to September, the typical first-time buyer took out a whopping £210,800 mortgage. That sum is a new all-time high, as noted by the people at Savills. Both borrowing has gone up, driven by growing wages and less stringent affordability checks. These changes which have allowed first-time buyers to be able to achieve larger mortgages are from all-time-high levels.
While the property market is starting to turn a corner, the gaps across the nation remain substantial. In the northern half of England the average cost of housing is almost 58% that of the south. This is a sharp contrast indeed that further underscores the north/south divide in property valuations that continues to plague our area.
The FCA’s proposed reforms would particularly benefit first-time buyers and the self-employed. They do this in order to support these groups to successfully enter the housing market themselves. Together, these changes will almost certainly increase housing market activity. At the national level, affordability will continue to become more favorable as household income growth should outstrip growth in house prices and interest rates will tick down marginally.
“We expect housing market activity to strengthen a little further as affordability improves gradually via income growth outpacing house price growth and a further modest decline in interest rates.” – Robert Gardner